Researchers at the University of Kent’s Business School have published a paper detailing the performance of the silver price against the demand for solar panels and their energy output.

The team at the Kent Business School used quarterly LBMA silver prices against installed solar energy capacity and solar gross electricity production to assess whether the trends existed. Over the time period – 1990 to 2016 – the researchers saw that surges in solar panel demand led to identical surges in silver demand, which in turn boosted the price.

2008 and 2011 were prime examples of silver’s price jolting up. The financial crisis setting in helped boost all precious metals in 2008/09, but the very high Brent crude oil prices in 2011 also shocked the markets into a swift diversification in renewable energies – such as solar panels – with a price peak at around £30 per ounce.

Silver, out of all metals, has the highest electrical and thermal conductivity, making it perfect for solar panel production. At present, 20 grams of silver are used per panel, equating to 6.1% of the total cost per unit (roughly £121.31 per solar panel).

As part of the publication, lead author on the research, Ph.D. candidate Iraklis Apergis, said: “The research shows that silver price rises are directly linked to the increased demand for solar panels. This will likely have major implications for the longer-term use of solar panels and may require new alternative technologies to ensure solar panel production is cost-effective, or government subsidies.”

Silver is currently relatively cheap historically, at only 37p per gram. Within the last 12 months this has fluctuated between a narrow band of 35p per gram and 42p per gram. Simple mathematics show that at present prices, a solar panel contains £7.40 worth of silver. Just by calculating the cost with the recent 42p per gram high this could rise to £8.40 per unit but, if we choose the record high of 94p per gram as recorded in 2011, then the price of silver per solar panel unit shoots up from £7.40 to £18.80. This would increase the cost per unit by 8.6%, and it’s hard not to see that price being passed on to the consumer, which in turn could reduce demand.

The more likely direction for success is government subsidy and tax relief, but this relies on governments being proactive. The UK, for example, has feed-in tariffs; those generating energy from wind or solar can apply for payments from their energy supplier as a reward for contributing to the national grid, as well as get significant discounts on their existing energy bill due to their efforts.

A solar panel array in the Mojave Desert, California, as part of the Red Rock Canyon National Conservation Area.

The United States, on the other hand, is not being quite as progressive. In 2016, the United States had a record year for solar energy. It was responsible for 43% employment in the electric power sector too – nearly double that of the fossil fuel industry in the US. Yet, under President Trump, the 30% tariffs against China and the solar panels they produce have resulted in a marked decline in solar output and a loss of 20,000 jobs in the process. Trump’s logic was that US-produced panels would be adopted instead, but the materials required are readily available in China, not America, which is what helped keep costs down and give the United States an easy energy win for several years.

Fortunately, Forbes reports that the Solar Foundation expect some bounce back in 2019, and with pressure from left wing candidates in the Democratic Party, the idea of a New Green Deal and environmentally conscious politics is beginning to take root in the USA, which could potentially see a huge boost for solar usage and silver demand in the coming years.

The paper, titled Silver Prices and Solar Energy Production, was published last week in the journal ‘Environmental Science and Pollution Research’.

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Precious metal prices can be volatile and the value of your metal may go down as well as up. No responsibility can be accepted by Jewellery Quarter Bullion Limited for any loss caused by acting on information we have provided. We do not offer investment or tax advice and recommend that you conduct your own independent research before making any investment decisions.

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